April 19: In a surprise move, the oil regulator Directorate General of Hydrocarbons (DGH) has rejected two gas discoveries made by Reliance Industries off the Orissa coast and has refused to approve the budget on its prolific KG-D6 gas fields. The DGH will not recognise the two discoveries Reliance made in the NEC-25 deep sea block off the Orissa coast because the tests done to confirm reserves were different from the ones recommended by the regulator, sources in know of the development said.
DGH lowered the in-place reserves in NEC-25 to 3.5 trillion cubic feet (tfc) from about 5 tcf indicated by Reliance. On similar grounds, DGH is likely to reject four discoveries in Krishna Godavari basin KG-D6 block where the regulator is yet to approve the spending for 2010-11 and 2011-12.
DGH, which as per the norm has to approve exploration and production spending on a block at the beginning of the fiscal, has been holding back approval for Reliance’s 2010-11 budget for KG-D6 for several months. Reliance executive director, Mr P.M.S. Prasad, had last year highlighted the delays that have threatened to derail the company’s multi-billion dollar oil and gas campaign to the oil secretary, Mr S.Sundareshan but things haven’t changed. Sources said that DGH has not yet approved the expenditure already done on KG-D6 fields during 2010-11 and the budget for the current fiscal too is pending with it.
DGH, they say, wants the budget to be recast to include cost of drilling more wells on the Dhirubhai-1 and 3 gas fields — first of the 18 gas discoveries in KG-D6 that have been put into production, in the budget. It wants a little less than $1 billion expenditure on drilling 11 wells, including two wells that were to be drilled last fiscal, to be included in the budget for 2011-12. This despite being informed that expenditure on additional wells would be a drain as they would be tapping the same pool of resources. The 18 wells on ground are capable of recovering resources on the D1 and D3 fields and additional wells would not help in raising the output, sources said.
Both the Reliance spokesperson and the DGH director general, Mr S.K. Srivastava declined to comment on the issue. DGH has been unhappy over Reliance’s inability to stick to the approved Field Development Plan (FDP) for D1 and D3 gas fields in the KG-D6 block, leading to significantly lower level of gas production from what was okayed. According to the FDP, Reliance was meant to put 22 wells on stream by April 2011, to achieve a production level of 61.88 million standard cubic meters per day. The plan envisaged an output of 80 mmscmd from a total of 31 wells by April, 2012.